The first week of November 2011 was an eerie one. The mood in many media outlets, the financial markets and political sphere was almost hysterical. There was the tentative climax of the “Greek tragedy” and the beginning of the “Italian drama”. But

Helmut Schmidt and Giscard d’Estaing: What Needs to be Done After the Brussels EU Summit

By Michael Liebig

The 50% “haircut” of Greece’s debt was inevitable. Most private creditors had already written off their Greek state bonds by that percentage – or more. The € 440 billion “European Financial Stability Facilty” (EFSF) has gotten the

In early May, a poll conducted for the magazine stern showed that 43% of the Germans polled oppose German financial aid to Greece, while 51% find it acceptable. On May 26, the Frankfurter Allgemeine Zeitung titled an article on the same subject “Swelling Disgruntlement”. However, the disgruntlement is the German population has

Slowly the smoke is clearing over the “Euro battlefield”. The speculative “war of aggression” against the Eurozone, as the head of the German Financial Supervisory Agency (Bafin), Jochen Sanio, put it on May 5, seems to have topped out. The pundits are proclaiming that the battle was lost by Europe and the euro. Supposedly, the status of the euro as a world reserve currency has been irreparably damaged, while the US dollar has asserted its role as “the” world reserve currency and safe haven for angst-driven investors.

The focus on the crisis over Greece has eclipsed important geopolitical and geo-economic developments in the neighboring Balkans region. South Eastern Europe and the Adriatic Sea have become a crucial area of transit for trade between Europe and Asia. And China is positioning itself as an important player in the Balkans.

The „Greek crisis“ has become the catalyst for long overdue regulation of derivatives speculation. As Western governments will have to raise $4 trillion in 2010, speculation against sovereign debt simply cannot be tolerated any longer. But the next big issue of financial policy is already on the table: „Controlled“ inflation as an instrument of crisis management. That is what the IMF’s chief economist is recommending. Not only the Bundesbank is not amused.

Since the beginning of the year 2010, the Anglo-American and also continental European mainstream media have been indulging in the financial and fiscal woes of Greece. If we believe the media, Greece is tottering at the brink of state bankruptcy and might detonate the European Monetary Union (EMU). Moreover, we are told, not only Greece but the whole southern belt of the Eurozone – Portugal, Spain and Italy – has become a financial and fiscal disaster area. One should add however that the hype over Greece is accompanied by massive currency speculation against the euro and by a massive speculation drive with respect to “credit default swaps” (CDS). The “global players” of international finance are back to the very speculation practices which caused the 2007/08 financial crisis. If there’s one sensible conclusion from the “Greek affair”: States must finally get tough on financial regulation. This is as important for their credibility as fiscal discipline.